Canada’s merchandise trade account recorded a trade surplus of $3 billion in October, the third consecutive month in black ink. This comes after September’s surplus was revised slightly upward to $1.1 billion.
Exports advanced slightly by 0.1% month-on-month (m/m) in October, though 6 of 11 sectors posted decreases in export values. The large increase in aircraft and other transportation equipment (+15% m/m) did just enough to offset export declines in energy products (-1.2% m/m), industrial chemical, plastic, and rubber products (-3.5% m/m), and industrial machinery and equipment (-2.4% m/m).
Meanwhile, total imports slipped by 2.8% m/m in October, with 8 of 11 sectors declining on the month. Imports of motor vehicles and parts (-5.8% m/m) posted its first decline in seven months, while the highly volatile imports of unwrought gold, silver and platinum contributed most to the decline (-41.2% m/m). Energy products (-8.0% m/m) and farm, fishing and food products (-4.1% m/m) also meaningfully declined.
In volume terms, overall imports decreased by 3.2% m/m in October while exports edged down slightly by 0.1% m/m.
Canada’s trade surplus with the United States widened for a fourth consecutive month to $12.1 billion in October.
Key Implications
October trade data provides a first look for how net trade will feed into GDP growth in the fourth quarter. Recall that growth revisions over the past two quarters hit net trade more than any other GDP component, with net exports acting as one of the largest drags to Q3 growth. With export volumes tracking higher than imports in October, trade may shape up to be a small tailwind for Q4 growth.
The trade effects induced by shocks over the past quarter appear to have been reversed over the past few months, potentially leading to cleaner readings going forward. That said, the details in the trade data suggest some slowing momentum in international demand with key trading partners. This will be an important factor to watch over the coming months.
